Why Digital Insurance Is Important

Today, it's not just businesses that rely on computers, network servers and the Internet, everyone does. From Fortune 500 multi-national corporations, to government facilities, colleges, universities, hospitals and individuals we all depend on electronics in our daily lives. We store a tremendous amount of not only our working lives, but our personal lives on our computers as well. Years of photos, videos, tax records, banking information, genealogy, addresses, medical records and homework are all sitting on our computer.

According to a survey conducted by Wakefield Research and Carbonite, "51% of Americans have lost all their digital files from a computer crash, yet 39% reported they've never backed up their files, or at least haven't done so in the past year."

Most of us realize what a catastrophic loss a hard drive crash would be to a business, but we never give a thought to the personal loss it would cause. This is especially true if you operate a home business or if you're a freelancer. Imagine losing contracts, business contacts, plans, business tax records, commercial photographs, wedding videos or an endless list of items that are stored on your computer.

Digital Insurance a Brief OverviewSince computers became a staple in businesses, insurance companies have offered policies to cover digital assets. This coverage, however, was generally exclusive to the "hardware" components of the electronics. The policies would cover the computer if it crashed by reimbursing you for the cost of the computer. It would for example, cover the cost if you spilled your morning coffee across your keyboard. It would also cover theft or damage caused in a fire or other natural disaster. What these policies did not cover was the information contained on those computers.

Insurance companies did not, and many still do not, consider the information contained on your computer as "tangible property." There are cases currently in litigation trying to decide the "tangible" aspects of digital files.

There are numerous policies that homeowners, freelancers and small businesses can obtain rather inexpensively for protecting the "physical damage" to a digital item such as a laptop, smartphone, iPad or Kindle. Protecting the data contained on these devices has been your responsibility.

Choices in CoverageThere are a wide range of policies in digital insurance, with many coverage options. If you are considering data insurance coverage, be sure the policy fits the needs of your specific business. There are some business policies that already cover digital losses under "all risk" policies or under "named perils insurance policies." These policies vary greatly between insurance providers, you would be advised to read the policy carefully and ask your provider detailed questions of what coverage would currently be provided in the event of a cyber-attack or loss of digital files.

When considering adding an additional policy for digital insurance, here are a few to consider:

Business InterruptionYou might want to consider this coverage if you sell items online. If your site is interrupted by storms, hackers or electrical surges, this type of coverage will reimburse you for losses sustained during the "outage" or time period your business' service was interrupted.

LiabilityReferred to as the "malpractice insurance" for the rest of us, this coverage will protect you in the event any of your services are threatened with a negligence suit resulting from "errors and omissions" in your online content.

Crisis CommunicationIf an outage, a hacking problem or other erroneous threat is sent onto the web or your customer base from your network, this coverage will help defray or reimburse the cost of hiring public relations experts and attorneys who can help repair damage to your company's reputation.

Network Security Property LossIf a hacker, or virus, infiltrates your network, this can help defray the cost of IT experts to clean up the network, or replace the destroyed system.

Web Content LiabilityThis is protection against "copyright, trademark, slander and other suits" that you could encounter from information posted on your website. If you are considering this coverage, make certain that it covers not only what can be seen on you webpage, but also what can't. Legal actions can be taken over your meta tags, cookies or postings you've made on other sites.

Legal Liability to OthersIf your business is the victim of a hacker, security lapse or other infringement on your website or a server that damages another business or individual, this coverage would offer you protection against a lawsuit. This insurance could also offer you protection if you or an employee forwarded an email that contained a virus that infected another system.

New Digital Insurance PoliciesRecently introduced data insurance policies are beginning to cover loss of data. These policies are currently aimed at larger businesses, not small business or individuals. Data insurance coverage is currently available as at "rider" or "floater" to a traditional business or commercial policy. The process of obtaining this insurance isn't simple either. Insurance providers can ask for an "online security assessment," may require an extensive technology evaluation (consisting of a network evaluation or update), an "on-site" security check, background checks on employees and you might be asked to let one of their digital experts "hack" your system as a security measure. After this initial evaluation, your policy and the cost of that policy would be determined.

Policies of the FutureInsurance experts see many additional forms of data insurance coverage becoming available over the next several years. Ty Sagalow, executive vice president and COO of American International Group's (AIG) eBusiness Risk Solutions, says, "network security insurance is the fastest growing product in the history of insurance giant American International Group."

While limited forms of coverage are now available, it will be a common business requirement of insurance coverage over the next several years.

Protect YourselfThe best insurance you can have is being diligent about the protection of your data. While insurance is necessary, and you can get monetary compensation for your losses, it will not replace the valuable information you can lose. Your best insurance is backing up your data. Invest in a reliable backup hard drive or other data storage unit and consistently back up your computer or network.

Consider budgeting for online storage of your data. Prices can range from free for 5GB or less up to $70 per month for 70GB, depending on the amount of data storage you require. There are several online services that provide multiple storage options. These are the most popular services. Additional online storage services can be found by doing an Internet search.

The Bottom LineNo amount of insurance coverage is going to give you complete security from hackers, viruses or lost data. Insurance can provide monetary compensation for losses, but it will not replace your valuable information, much of which is "irreplaceable." Backing up your computer, server or network on a consistent basis is vital in safeguarding your digital files. As much as maintenance will lengthen the life of your auto, conscientious data backup could save your business and save irreplaceable memories.